Earnings guidance falls far short of expectations, Intel (INTC.US) plunges 29%, marking the largest single-day drop since the 1970s

According to Zhihui Finance APP, Intel (INTC.US) shares plunged 29% on Friday, marking the largest single-day drop since the 1970s. This came after the company issued fourth-quarter guidance that fell far short of market expectations, mainly due to an accident at its chip plant in Israel and the continued weakness in the personal computer (PC) market. The news severely dented investor confidence in Intel's business recovery and put CEO Pat Gelsinger’s transformation plan under renewed pressure.

Intel's earnings report released after Thursday's market close showed the company expects fourth-quarter revenue between $15 billion and $16 billion, and adjusted earnings per share of $0.25, both significantly below market forecasts. According to LSEG data, analysts had previously expected Intel's fourth-quarter revenue to reach $17.1 billion, with adjusted earnings per share of $0.43.

Intel CFO David Zinsner said the PC market's weakness is expected to persist at least through the first half of 2027. "We believe the PC market slowdown will last at least through the first half of next year," Zinsner stated. The company will continue to invest cautiously in capacity and working capital to expand supply and support future growth.

Soft PC market demand is closely related to rising costs for components such as memory chips. Data from research firm Counterpoint Research showed that global PC shipments dropped 4% year-on-year in Q2 2026, reflecting that cost pressures are suppressing end-market demand.

In addition to weak industry demand, an explosion earlier this month at Intel’s chip manufacturing plant in Israel further impacted the company's production and delivery capabilities. The accident killed two employees, severely injured another, and caused a prolonged plant shutdown, affecting shipments of Intel’s 10nm chips.

Pat Gelsinger described the incident as "an unfortunate and heartbreaking accident" during the earnings call, noting the lengthy production downtime had a clear impact on product supply. Zinsner estimated that this incident would cost Intel about $600 million in revenue over two quarters.

Stock Rose 150% Year-To-Date; Wall Street Questions Intel’s Recovery Prospects

This plunge is especially devastating for Intel, as its stock had gained about 150% year-to-date before the earnings report was released.

Previously, the market had high hopes for Intel’s recovery prospects, partly because the rapid development of agent-based AI applications has renewed focus on the central processing unit (CPU), heating up demand expectations for related products. However, the latest guidance shows Intel still faces significant operational challenges, especially with continued weakness in the PC business and manufacturing uncertainties.

D.A. Davidson downgraded Intel’s stock rating from “Buy” to “Neutral” on Friday and expressed concerns about the company's recovery process. The analysts stated that while it’s clear the PC market faces industry-wide pressures, given the degree of Intel's business weakness, the current valuation remains hard to justify.

Intel's stock plunge also slashed the value of prior investments by the US government and Nvidia (NVDA.US). Last year, the Trump administration pushed for the US government to take a 10% stake in Intel to support the development of domestic advanced chip manufacturing. While this investment is still in profit, Friday’s sharp decline in Intel’s share price reduced the US government's holding valuation by about $12 billion.

Meanwhile, Nvidia’s $5 billion investment in Intel also suffered, with the valuation of its stake dropping by roughly $6 billion on Friday.

Wafer Foundry Business Remains Key to Transformation; Advanced Nodes Have Yet to Win External Clients

For Pat Gelsinger, who became CEO in March 2025, Intel’s disappointing performance is undoubtedly a major setback. Since taking office, Gelsinger has focused on driving a business turnaround, hoping to help Intel catch up on growth opportunities it missed at the beginning of the AI wave. Among these, the wafer foundry business is seen as a crucial part of Intel’s transformation strategy.

Intel is the only US-based company with advanced logic chip manufacturing capabilities and has achieved mass production of the most advanced 18A process chips at its new Arizona plant, aiming to provide customers an advanced chip manufacturing alternative to TSMC (TSM.US).

The company’s next wafer fab in Arizona is expected to be operational by the end of 2028. However, despite progress in advanced nodes, Intel has yet to win external clients for its next-generation chip manufacturing business, and commercialization prospects for the foundry business remain uncertain.

During the earnings call, Gelsinger said the company expects several customers to be ready to publicly announce collaborations in the next two quarters, and that Intel is making “huge progress” in its next-generation 14A process technology.

Tech Sell-Off Spreads, Nasdaq Falls Nearly 3%

Amid Intel’s stock plunge, the US tech sector is experiencing a broad sell-off. On Friday, the Nasdaq Composite Index fell 2.9%, capping a week of poor quarterly results from tech heavyweights. Previously, Google parent company Alphabet (GOOGL.US) saw its shares tumble more than 12% on Thursday—the biggest single-day drop since the company went public—and continued to fall on Friday.

Amazon (AMZN.US) also dropped 1.4% on Friday. The company’s third-quarter revenue and profit both missed market expectations, while it maintained its 2026 capex guidance at $220 billion.

It’s noteworthy that Amazon has posted negative free cash flow for the second consecutive quarter, with the cash flow gap widening compared to the previous quarter, deepening concerns over the return on AI investments by tech giants. Other semiconductor stocks also came under pressure. Nvidia fell 4% on Friday, Broadcom (AVGO.US) dropped more than 5%, and Qualcomm (QCOM.US) plummeted 11%.

As tech companies continue investing huge sums in AI infrastructure, investors are increasingly focused on whether such investments can translate into real returns within a reasonable timeframe.

However, Raymond James chief market strategist Matt Orton believes the recent correction in tech stocks does not signal a fundamental deterioration in industry fundamentals. He said the market now needs to reassess the concentration of tech sector holdings and valuation levels, rather than view this sell-off as a sector-wide crisis. “I don’t think this is the market facing a total reckoning, but investors really should consider whether, despite strong fundamentals, the concentration in tech sector holdings remains excessive.”